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Homes at risk because of delays on new flood insurance deal

Householders are being denied flood insurance because of delays by the Government and insurers coming to a new deal on affordable cover.

A ‘safety net' arrangement between government and the Association of British Insurers (ABI) to provide cover to flood-risk homes expires next June, and a new agreement has yet to be reached.

With less than a year of the existing deal remaining, councils have found that some householders who have tried to renew their insurance in the past few weeks have been denied cover or quoted hugely inflated prices.

The Local Government Association, which represents more than 350 councils in and , is warning that the longer government and industry stall on a new deal, the more households are likely to be denied cover and exposed to the risk of losing their homes in the event of severe flooding.

Government last week announced that councils would receive reimbursement for clearing up flood damage following record breaking rainfall over recent weeks.

But local authorities are concerned that communities will be hit hard if high risk areas effectively become blacklisted by insurers.

Cllr Clyde Loakes, Vice Chairman of the LGA's Environment Board, said:

"The extreme weather we have seen over the past few weeks is a stark reminder of the importance of flood insurance.

"It is absolutely vital that government and the insurance industry come to a new deal on providing affordable cover as a matter of urgency.

"Households are now being refused cover and left exposed to the risks of damage and destruction

"A new agreement should have been sorted long before now and the continuing delays are having a very real and severe impact on thousands of people who will be exposed to the risk of losing their homes if they are unable to find insurance.

"Government has committed to ensuring councils will be fully reimbursed for the cost of clearing up streets following the record rainfall.

"But families are now paying the price for the lack of decisive action from government and the insurance industry and can afford to wait no longer."

Councils have been calling for clarity on arrangements to replace the current statement of principles for the past two years.

When the north west of was hit by floods earlier this month, one local authority found that an estimated 100 out of 800 homes affected were without insurance.

Local authorities also know of people in areas including Nottinghamshire, Worcestershire, Devon, and Huddersfield who have been refused or priced out of home insurance because of flood risk.

Author: LGA Media Office
Contact: Simon Ward, Local Government Association Media Office, 020 7644 3333

Notes to editors

1 The LGA wrote to Government and the insurance industry body the Association of British Insurers in February to urge them to come to a new arrangement to ensure affordable flood insurance would still be available next year. Local authorities are calling for:

Government and the insurance industry to urgently outline how affordable insurance will be provided once the existing agreement expires on 30 June 2013.

Insurers to use the latest information on flood resilience measures, adopting a shared understanding of flood risks, when setting premiums so that people in areas where the risk of flooding is low do not face disproportionately high premiums.

Insurers to start taking into account flood risk prevention measures on people's homes when setting premiums. Steps like raising plug sockets and anti-flood drainage systems can minimise the potential for damage in the event of a flood, but are not currently recognised by insurers.

The full media release is available on the LGA website:

LGA website

2 Environment Secretary Caroline Spelman last week made a statement that: "Government and insurance industry are continuing to make progress towards a new agreement on the future of flood insurance."

The full media release is avaialble on the Department for Environment Food and Rural Affairs website:

Department for Environment Food and Rural Affairs

3. Sir Michael Pitt's Review of the floods in 2007 revealed that the cost to insurance industry was £3 billion – equivalent to almost £55,000 per flooded property. Based on those figures, if 200,000 flood risk properties were not insured, it would leave householders and local authorities facing a liability of just under £11 billion.

The review can be found on the The National Archives website:

The National Archives

4. Earlier this year, the Association of British Insurers warned that 200,000 homes risked facing problems getting flood insurance when the current agreement between the industry and government expired  next year. Please see their website for more information:

Association of British Insurers

5. The current Flood Insurance Statement of Principles agreed in 2008 and expires in June 2013. It commits insurers to continue to offer insurance to existing customers where they are at significant risk, if there are plans in place to reduce that risk within five years. It does not apply to homes built since 1 January 2009.

 

 

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